Chapter 17 - Name: Nguyen Thi Lan Thanh Student ID: 1236311...

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Name: Nguyen Thi Lan Thanh Student ID: 1236311 CHAPTER 17 Questions 17.1/ What are the key factors on which external financing depends, as indicated in the AFN equation? The key factors on which external financing depends, as indicated in the AFN equation are: - Spontaneous increases in Accounts Payable and Accruals - Addition to Retained Earning - AFN: Additional Funds Needed 17.2/ Assume that an average firm in the office supply business has a 6% profit margin, a 40% debt/ assets ratio, a total assets turnover of 2 times, and a dividend payout ratio of 40%. Is it true that if such a firm is to have any sales growth (g > 0), it will be forced to borrow or to sell common stock (that is, it will need some nonspontaneous external capital even if g is very small)? Explain. It is false if such a firm is to have any sales growth (g > 0), it will not be forced to borrow or to sell common stock (that is, it will need some nonspontaneous external capital even if g is very small). Because if such a firm has low growth rates, internal financing will look after the firm’s problems. 17.4/ Certain liability and net worth items generally increase spontaneous with increase in sales. Put a check mark ( ) next to those items that typically increase spontaneously . Accounts payable
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This note was uploaded on 11/23/2011 for the course MANAGEMENT 101 taught by Professor Nguyen during the Spring '11 term at Troy.

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Chapter 17 - Name: Nguyen Thi Lan Thanh Student ID: 1236311...

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